The Government recouped €500m of the €2.7bn cost of bailing out Permanent TSB yesterday through a series of interconnected finance deals, including a sale of bonds and new Permanent TSB shares. The cash will go to reduce the national debt.

The sale of a quarter of the bank on the stock market was effectively a reflotation of the nationalised bank.

Combined with the earlier €1.3bn sale of Irish Life, it means 45pc of the €4bn costs of rescuing Irish Life and Permanent Group during the financial crisis has now been recovered.

Finance Minister Michael Noonan called yesterday's deal a significant milestone for the bank and said it still leaves taxpayers with a valuable stake in Permanent TSB.

Small Permanent TSB shareholders, many angry after their combined stake in the bank was reduced to just a fraction of 1pc when the lender was nationalised, will now have a chance to row in behind the new investors on the same terms and at the same €4.50-a-share price as the deal done on the markets.

Investors' packs are expected to be posted to shareholders in the coming days, updating them on the deal and giving them three weeks to decide whether to buy into the new deal in order to maintain their stake or see it reduced further. Failing to reinvest will see shareholdings automatically diluted by the new stock.

Yesterday's deal involved a number of moving parts. The bulk of the money being recovered by taxpayers is from repayment by Permanent TSB of a €400m debt known as "contingent capital" owed to the Government.

It will be paid back from the sale of €400m new shares by Permanent TSB itself.

The Government's 99.98pc stake in Permanent TSB will be diluted as a result of the share sale, but repayment of the bonds means the State still recoups the cash.

In addition, the State has opted to sell a further €98m of its shares in the bank, for cash.

That boosts the total returned to taxpayers and in addition means Permanent TSB meets the Irish Stock Exchange minimum threshold of having at least a quarter of the company's shares trading on the markets.

The deals value the State's remaining 75pc State shareholding in Permanent TSB at €1.5bn.

In a separate, though connected deal yesterday, Permanent TSB raised a further €125m by issuing new high risk bonds to investors. The so-called additional tier one debt carries a high interest rate of 8.625pc but will convert into shares automatically if the bank misses financial targets.

The €125m will be kept by Permanent TSB to boost its balance sheet to levels demanded by regulators.